A broad divergence in macroeconomic conditions and central bank policies around the globe — combined with weak earnings in the U.S. and currency fluctuations — will result in volatility, and risk aversion, concludes Invesco Fixed Income Chief Strategist Rob Waldner.

He is especially cautious about high-yield and emerging market debt, both sovereign and corporate. He says European investment-grade credit will get a boost by the European Central Bank’s quantitative easing program. In the U.S., he says investment-grade credit is likely to underperform U.S. Treasuries.

Waldner argues the case for active management within fixed income:

“We believe investors should be cautious in taking credit exposures, and that simple broad credit allocations are to be avoided in favor of more directed, idiosyncratic credit opportunities. With volatility comes opportunity, but it is more important than ever for investors to do detailed research to avoid credit accidents that are likely to come with increasing frequency in coming quarters.”

While high-yield bonds were getting clobbered in July, high-grade bonds held up better, even if that just meant treading water. Investment-grade corporate bonds posted a 0.0% return in July, per LPL Financial, while the iShares iBoxx $ InvesTop Investment Grade Corp. Bond Fund (LQD) gained 0.3% and the Barclays Aggregate index fell by 0.3%.

Volatility is one thing that did rise for high-grade corporates, with one-month credit vol almost doubling since May, according to Bank of America Merrill Lynch. That merely brings things back in line where they should be, says BofA credit strategist Hans Mikkelsen, but the upside for high-grade corporates is still pretty minimal:

[T]he current level of volatility feels about right. With that, IG credit has now transitioned to an asset class with limited upside for valuations and higher uncertainty, which supports our market weight (neutral) recommendation within the context of a fixed income portfolio. While current, higher, volatility levels are supported by the combination of rates and geopolitical risks, we suspect that over time credit investors will become more concerned about the former, less about the latter.

Bond investors ought to get used to the mediocre performance of most high-grade bonds (save for long-dated bonds) over the past couple of months, because the gains seen earlier this year won’t likely happen again, writes LPL fixed-income strategist Anthony Valeri:

The pace of bond performance was unsustainable, and June and July performance may signal exhaustion…. We believe June and July are broadly representative of what bond investors can expect going forward. Year-to-date strength has led to lower yields and higher valuations across the bond market…. A benign statement from the Fed and stock market volatility lent support to bonds, but neither economic data nor the Fed provided the catalyst for another round of bond gains.

Volatility in bond markets, which has been at unusually low levels for government bonds and corporate bonds alike, has taken another leg downward since the Fed unveiled QE3 last week. Bloomberg reports today that QE3 has sharply cut demand for certain options used regularly in the mortgage-bond market that hedge against changes in interest rates:

Mortgage bond holders often use swaptions, or options on interest-rate swaps, to guard against swings in rates, which can trigger changes in levels of expected mortgage refinancing and the debt’s value. Losses on mortgage debt are greater than on similar maturity and coupon Treasuries when interest rates rise due to so-called negative convexity, which causes the bonds duration, a measure of price sensitivity to interest-rate changes, to simultaneously increase.

Bond market volatility is already approaching the lowest levels since just before the global financial crisis. The fall suggests the $40 billion monthly mortgage purchases and rate guidance announced last week by the Fed may prove to be successful in pushing investors into higher-returning assets, a goal of the central bank as it seeks to spur economic growth and lower unemployment.

Amey Stone is Barron’s Income Investing blogger and Current Yield columnist. She was formerly a managing editor at CBS MoneyWatch, MSN Money and AOL DailyFinance. Her responsibilities included overseeing market coverage and personal finance topics. Prior to those roles, she was a senior writer at BusinessWeek where she authored the Street Wise column online and contributed to the magazine’s Inside Wall Street column. Topics covered included economics, corporate finance, Fed policy, municipal bonds, mutual funds and dividend investing. She co-authored King of Capital, a biography of Citigroup Chairman Sandy Weill. She is a graduate of Yale University and Columbia University’s Graduate School of Journalism.